tv Nightly Business Report PBS April 29, 2011 6:30pm-7:00pm PDT
>> tom: the greenback sees red. u.s. dollar hits its lowest point since the financial crisis. but there may be an upside. what a weaker dollar means for big business and your purchasing power. you're watching "nightly business report" for friday, april 29. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
captioning sponsored by wpbt >> tom: good evening and thanks for joining us. my colleague susie gharib is on assignment at the berkshire hathaway annual meeting in omaha. we start with a look at the u.s. dollar. for years the american greenback was the go-to currency in times of worry and prosperity. but thanks to less than stellar economic data and expectations the federal reserve will keep interest rates low. tonight, the dollar is at its lowest value in more than a year against the euro, british pound and canadian dollar. it's at the lowest level ever against the swiss franc. we have two reports looking at the weaker dollar. in a moment, how the drop has meant big profits for some u.s. companies. but first, darren gersh looks at what a weak dollar could mean for you. >> reporter: if you couldn't
afford to pop across the pond to celebrate today's wedding with kate and wills, don't feel bad. in fact, feel patriotic. by keeping your dollars here at home, you are doing exactly what the u.s. economy needs. the dollar is down almost 8% this year against the british pound and other currencies of major trading partners. that makes it more expensive to get to london and buy souvenirs. economist mark calabria says that also makes it more attractive to save and invest at home. >> and there's an extent to which, yes, you can't have that- - do whatever you want to do, whether it's go to the royal wedding or be the world's policeman. all of these things start to become very expensive when you no longer have currency that people will buy, will take in exchange for anything. >> reporter: the declining dollar makes u.s. exports cheaper, boosting manufacturing and agriculture. but it also makes oil imports more expensive and hurts wall street capital markets by
reducing the returns to investments in the u.s. >> there are some pretty big costs to it, there are some pretty big benefits to it, and those who are going to bear the costs are going to be pretty loud about it. >> reporter: so loud federal reserve chairman ben bernanke was forced this week to explain why his policy of pumping money into the economy was not driving down the value of the dollar and undermining its role as the pre- eminent global currency. >> ultimately, the best thing we can do to create strong fundamentals to the dollar in the medium term is to, first, keep inflation low, which maintains the buying power of the dollar; and second, to create a strong economy. >> reporter: while some fear the nation's massive federal debt will bring on the collapse of the u.s. dollar, market pros like jens buckler think the current weakness reflects higher interest rates abroad. >> it's not a sign of impending doom. it's not a sign of collapse. it's none of those. it just is what it is. right now, we are offering less of a yield than, say they will
in europe. so capital is going to flow that way. >> reporter: the dollar is expected to recover when the economy recovers and interest rates here begin to rise, perhaps in time for american tourists to come catch a glimpse of the first child of the duke and duchess of cambridge. darren gersh, "nightly business report," washington. >> reporter: this is erika miller in new york. if you want to find businesses that love a weak dollar, look no further than times square-- the heart of u.s. tourism. many foreigners travel here because their money can go a lot further than it did a year ago. those visitors are the lifeline of stores like "phantom of broadway," as anna maria cin will tell you. how much of your business comes from foreigners >> 90% >> reporter: and what are they buying?
>> everything. >> reporter: she says sales are up over 30% compared to last year. but tourism is not the only sector of the economy that is benefiting from the dollar's fall. many u.s. firms are seeing strong sales overseas, because their goods sell at cheaper prices. and as analyst scott wren points out, the impact has been significant on earnings. >> i think the weaker dollar is always a tailwind. it kind of puts the wind at the back of a lot of these companies, if you consider that almost half the revenues for the s&p 500 comes from overseas, it definitely makes a difference. >> reporter: eli lilly, coca- cola, i.b.m., 3-m, mcdonald's and dupont are just a few well known companies crediting a weaker dollar for boosting profits. but it's important to recognize that even for big multinational firms, there are downsides to the dollar's decline. like pushing up the price of many commodities including energy. >> higher input cost usually hurt the margins for companies especially when companies are in a situation like they are in right now, at least in my opinion, they really can't pass
along these costs to consumers. >> reporter: a falling dollar also means americans have to pay more for goods made outside the u.s., as s&p's rich peterson explains. >> you have american consumers bearing the brunt because they are paying higher prices for imports. so the drag could be to economic activity going forward. >> reporter: currency could be an even bigger factor in second quarter earnings, if the dollar continues to weaken. that's fine with many times square businesses, hoping for an influx of tourists this spring. erika miller "nightly business report" new york. >> tom: here are the stories in tonight's nbr newswheel: stocks closed higher today, lifting the dow and the nasdaq to their best monthly performances since december. the dow rose 47 points, the nasdaq added a point and the s&p 500 up three points. big board volume rose to just under one billion shares. nasdaq volume climbed to two and a half billion shares.
for the week, the dow rose 2.4% with four days of gains. the nasdaq rose in all five sessions for a 1.9% weekly advance. the s&p saw smaller gains towards weeks end. but from a week ago, it added 2%. americans earned more and spent more last month, mostly due to rising gasoline and food prices. personal incomes rose half a percent in march, while spending was up six-tenths of a percent, according to the commerce department. and a federal judge says hundreds of lawsuits against toyota can go forward. the cases deal with possible sudden-acceleration defects with recalled toyota vehicles. the first trials are expected to begin in about two years. still ahead, james paulsen is back as our market monitor. despite the economy slowing in first quarter growth, he thinks the job market is picking up steam and that will help stocks. >> tom: seven states continue searching for survivors and
victims from the string of deadly tornadoes that hit earlier this week. alabama saw the worst damage and highest death toll. in addition to the disaster, some communities are dealing with long lines at gas stations, no electricity and even looting. walt maddox is the mayor of tuscaloosa, alabama. mr. mayor, welcome to n.b.r., and our condolences to everyone suffering in your community from this storm. >> thank you very much. >> tom: what can you tell us the day after the latest damage assessment in your community? >> well, right now we have 45 confirmed dead, nearly 1,000 injured, and we believe that will rise, along with the death toll. and we have scores of people that are missing, but we're not sure whether it's just because of lack of communications, and they just haven't been located or they're still part of the destruction path across tuscaloosa. >> tom: still clearly in a recovery mode, in a rescue mode
right now, mr. mayor. what about property damage and damage to homes and businesses. have you been able to get any early assessments? >> we know that 15,000 people were damaged or their homes damaged along the path of the tornado, to give you some sense. 5.9 miles long was the path from a quarter mile to a mile wide throughout the city. >> tom: president obama visited your community today. are you satisfied so far with the federal government response? >> fema has been there since the beginning, and working through our state e.m.a., we have got everything that we've requested. we're going to be relying on them even more in the coming days and weekend ahead as we transition into debris removal and finding housing for those that have lost everything. the president was-- was very interested and engaged today, and i must say, that he provided a lot of hope to our community, and he provided us a lot of resources that will help this community move forward more quickly, and i'm very glad that
he came. >> tom: mr. mayor, let's talk about the resources that are in tuscaloosa and the are you sounding areas. a number of big employers have had to temporarily shut down plants because of no power or lack of supplies, including boeing, toyota, mercedes-benz with a plant just 20 miles outside of your town employing some 3,000 workers. how soon could these get back up and operating? >> i think you will probably see that happen within 48-72 hours. the majority of the major manufacturing sectors did not receive damage. their issues are more logistical with employees, obviously, being affected, and water supply, which is another issue that we've been dealing with in the last 46 hours. but i do think those problems will begin to iron themselves out and hopefully in the next 48 hours, we can see progress. the economic impact of this is anything to be another one of those liabilities that hasn't been addressed, but will, indeed happen. we've got a lot of people who lost jobs because where they worked is no longer there. >> sam: sglom and this happened
when the unemployment rate has shown some degree of working itself down. before the financial collapse, your unemployment rate was 2%, 2.5%, shot higher into the double digits during the recession and has fallen ream. do you think this could really put that job creation to rest, with this disaster, or do you think it will respark it? >> i think initially, this is going to be a setback, but i think as we rebuild, we'll become stronger than ever, but reality from a just operating the government is that on top of the expenses for the damages, we're going to lose revenue, and that's something we'll have to work through during this process >> tom: do you have the finances for it? >> we have very strong revenues. we probably have the highest credit rating of any municipality in alabama. we have strong reserves and i'm glad we do. >> tom: mayor maddox we appreciate your time, and gaern our condolences to the victims and our best hope for the survivors.
our guest is walt maddox, mayor of tuscaloosa, alabama. >> tom: this was the best month for the dow jones industrial average and the nasdaq this year. and commodity prices continue popping. let's get to tonight's market focus. the major indices gained about 3% this month, led by the healthcare sector, which was the worst performing sector in 2010. let's look at the last 30
sessions of the health care exchange traded fund. it was down a fraction today. buyers didn't move in until the middle of this month, but since then, the sector has been gaining nicely. here's the past year of this healthcare fund. this month it was able to break out of the range it had been in. helping the broad market today was caterpillar. it blew away estimates with its first quarter profit of $1.84 per share-- a huge jump from last year. demand is surging for mining gear and construction equipment. cat was the best dow stock today thanks to this 2.5% rally. volume almost doubled on this move. the move puts cat at a new 52 week high. in fact, this is an all-time high. fueling buyers today, cat boosted its earnings forecast for the year. the drag on the dow came from microsoft.
earnings last night came in as expected to the penny. with no excitement, shares fell 3%. volume was big more than 266 million shares. microsoft usually trades about one-fifth of that. the energy sector saw the biggest gains today. occidental petroleum was red hot, up almost 9%. volume almost quadrupled. this is a new all-time high after stronger than expected earnings. same story at e.q.t., with shares gaining 5.5%. oil giant chevron saw a much smaller gain despite higher earnings. speaking of energy, solar panel maker sunpower shot up more than 30%, easily making a new 52-week high. french oil giant total is buying a big stake of the firm. total will buy 60% of sun-power, paying $23.25 for each share. that values the company at over $2 billion. a couple of shoe makers got tripped up. crocs fell 5.5%. first quarter earnings tripled but its outlook was a step behind expectations.
deckers outdoor-- the company behind teva sandals and ugg boots-- lost 10%. it forecast a loss in the second quarter-- a big surprise. meantime, a couple of blue jean makers were moving in different directions. true religion apparel is at an 11-month high after much better forecast earnings. lee and wrangler jean maker v.f. corp fell 7.5%. it has hiked prices because of higher cotton costs. finally, bonds. here's that past 180 session of the yield on the 10-year government bond. at 3.3%, the yield has been falling this month as bond prices have been moving higher. one area to watch is 3.2%, which was its low yield in march. a drop below that and we will be at new 2011 lows for yields. and that's tonight's market focus.
>> this could be a tough weekend for warren buffett as he is grilled about the david soakle controversy. i will have the full story on monday and tweeting throughout the weekend. >> tom: here's what else we're watching for next week. our friday market monitor guest is robert stovall, managing director and strategist at wood asset managment. we'll also see the april reports on employment, chain store sales and auto sales. and monday, congress is back in session and the new budget debate tops the agenda.
get ready for $4 a gallon gasoline nationwide early next month. a.a.a. says the national average today stands at $3.91. that's up six cents from last week and more than a buck higher than last year. it's now just 20 cents below the record high. but experts say there's a chance the price could start to creep down after memorial day, when more gasoline is in the supply pipeline. meanwhile, higher fuel costs are also hitting the airline industry and fliers are going to pay for it. united and continental are hiking fares on many domestic routes by up to $20 a round trip ticket. u.s. carriers have boosted ticket prices more than a half dozen times so far this year, to cover the higher costs. it apparently isn't working. most airlines still lost money in the first quarter because of their fuel bills.
april comes to a close with the major stock indices at their highest levels since the financial collapse. but don't follow the calendar with your investment strategy. so says tonight's market monitor. james paulsen is chief investment strategist at wells capital management. he joins us tonight from minneapolis.
jill, always nice to see you. welcome back. >> great to be here, tom. >> tom: the old trading adjective "sell in may and go away." you say don't sell on monday, the first trading day of may. why not? well, you know, statistically, that works sometimes. there's no doubt about it. statistically, september's the worst month of the year, supposedly, but the problem with that is sometimes september ends up being the best year of the month, and so does may. and i just think it's tough for an investor, anyway, to call that. the better thing to do, tom, is stay focused on longer term fundamentals, and i still think they stay-- they're pretty good. >> tom: we will get a big data point on those fundamentals next friday in a week when we get the april jobs data. how could that shape the investment markets? >> i think that's a big factor, tom. we created about 100,000 private payroll jobs a month last year, and in the last two months now, we've created on average, 235,000 a month. i think we've had a definite upward ratcheting of job
creation, maybe a doubling of its rate of creation here in the last several months. i think we're going to stay at this higher level of 200,000 a month-plus, and if we do, that's going to really do good things for the consumer, for income trends, for retail sales, for business confidence about their sales trends. i think that will be a big factor helping the stock market and the economy as we go through the rest year. >> tom: sounds bullish. there have been a lot of reports on the drop in the dollar. does that drop worry you? >> well, it's certainly got inflationary overtones, and we're certainly witnessing that with watching what commodity prices are doing, oil, and prices at the pump. put it also does something really good, and i think that weak dollar with a lag is likely to improve our trade balance here over the balance of this year. so far, we're in our eighth quarter of this recovery, and the first seven, five of them e-trade subtracted from our growth rate in this country.
i think because the dollar has been so weak in the last year, we're anything to see trade adding to growth going forward over next year, and that's a positive from the weak dollar pawe've yet had but is going to start to occur. >> tom: one of your new investment ideas you brought along for us this spring is emerging markets, using the exchange traded fund with the ticker signal e.e.m., as the avatar for this. and it's had clearly volatility but also a nice rally. does the weak dollar play into this thesis? >> i think so. i think that the emarriaging markets had a real big relative underperformance from last fall till about february of this year. i bet it's in part because of emerging world officials have been trying to slow down their recoveries, like chinese tightening of interest rates, and i think they've succeeded in doing that and with that emerging markets starting to come back again, and i think they may dominate here in the rest of the year. so it's probably a good time, if you haven't been there, to maybe
start make a commitment. >> tom: you also like technology x.l.k., the exchange-traded fund here as we're looking at this sector and clearly had a nice rally during this earnings season. what kind of targets do you have in mind? what kind of expectations. >> i think one part of why we're favoring that right now, tom sbecause tech has had a terrible year, year to date, and they justarchs you mentioned, with thisarianings season now, they've pend up a little bit. i like tech because i think you've just got a ton of excess cash flow sitting in the corporate sector. they've been building that up with good profits over the last couple of years, and i think we could get into a very healthy new era of tech spending from the corporate sector. we've already got a pretty attractive spending coming from consumers right now, and i think it's a good time to accumulate those stocks. >> tom: let's look at your previous picks from last fall, october 29. you liked sdpraelz consumer discretionary. each has seen nice double-digit gains. do you still like these sectors? the consumer discretionary not
as much. they have done so well over the last couple of years. >> tom: yeah. >> but the industrials i still like. i just prefer emerging and technology better but i still think manufacturing is going to do well going forward. >> tom: what did disclosures with these funds? any positions? >> we don't in individual stocks. we certainly do in some e.t.f.s and other indices. >> tom: our friday market monitor guest in minneapolis tonight, james paulsen, with wells capital management. finally, get your pitchers and paper cups ready. sunday is lemonade day, a national effort to spark young entrepreneurialism. in tonight's "kids and cash," michael holthouse founder of national lemonade day spoke to us about how children can benefit from the experience of running their own business. >> we want to expose them to business and capitalism and free enterprise, but the essence of what they learn is simply this. that they can set a goal, they can make a plan and they can work that plan and achieve
whatever it is they want to achieve. their version of the american dream. >> tom: give us an idea of what type of plan a kid may have who is operating a lemon stand. >> well, every single youth is going to come up with their own unique product. even though it's all lemonade, maybe grandma's secret recipe or maybe organic or special sweetner. and so it's all about pricing, what the market will bear, where you're located and your cost of goods like any other business. >> tom: lemon prices are two and a half times higher. >> absolutely >> tom: what about profits? >> what kids do is that in their
neighborhoods, they pick location, location, location. where there are lots of people cost of goods they're selling value. >> tom: that was michael holthouse, founder of this sunday's lemonade day. you can see our entire interview online at nbr on pbs.org. just a reminder, susie gharib is at the berkshire hathaway shareholders meeting. she'll be tweeting about it all weekend @sgharibnbr. that's "nightly business report" for friday, april 29. i'm tom hudson. goodnight, everyone. we hope to see all of you again next week. "nightly business report" is made possible by: